Havel, Holásek & Partners: MAIN CHANGES TO BE BROUGHT BY THE “BIG” AMENDMENT OF THE LABOUR CODE

An extensive amendment of the labour code proposed by the Ministry of Labour and Social Affairs was passed by Parliament on 9 September, 2011, yet the Senate and its left-winged majority turned the bill down during its meeting on 7 September. However, as expected, the governmental coalition outvoted the Senate’s veto and the amended law will go into effect starting 1 January.

We would like to inform you of some of the main novelties.

Probationary period

Under the amended law, it will not be possible to agree on a probationary period for a term exceeding one half of the agreed term of employment. Thus, if the probationary period is agreed upon for a period of three months, the employment must be agreed upon for a term of at least 6 months.

The length of the probationary period will also change. While for employees in non-managerial positions the maximum length of the probationary period will remain three months, the probationary period for managerial staff will be extended to six months. Managerial employees are considered to be employees at the individual managerial levels who are authorised to define and assign work tasks to the subordinate staff, organise, manage and control their work and give them binding instructions to this end.

Due to some problems with interpretation in the practice, the amended law specifies that the probationary period shall be extended by the duration of all-day obstacles to work and by the duration of the employee’s all-day time off.

Another novelty is the option of also agreeing on the non-competition clause for the term of the probationary period, as the information or knowledge that the employer wishes to protect with the use of the noncompetition clause may also be acquired by the employee during the probation period.

Definite period employment

In contrast to the current legislation, the length of employment for a definite period of time will be extended to 3 years, however, at the same time, a definite term employment will be renewable two times at most. Thus, theoretically, the maximum total duration of a definite period employment will be up to nine years.

The exemptions from the time-limit for a definite-period employment which have been applied to replacements of temporarily absent employees in cases of serious operational reasons on the part of the employer, and due to the special nature of work to be carried out by the employee, have been cancelled. Also, the special provision for a definite-period employment that is contained in the act on universities and applicable to academic staff will be cancelled. As of 1st January 2012, the mentioned restrictions shall only be applicable to the agency employment and to the employment of foreign nationals.

Unfortunately, the transitory provisions of the amended law do not deal with the treatment of employment contracts concluded before January 2012.

Agreement on work performance

The maximum scope of work for which an agreement to perform a job may be concluded shall be extended from 150 to 300 hours, and the term for which the agreement is to be concluded must be specified in the Agreement under the amended law.

One novelty that is perceived negatively by the employers due to loss of current advantages is that different levies will be paid with respect to the work performed under agreements of this type: If the income exceeds CZK 10,000 a month, it will be required to pay a health insurance premium, a social security contribution and a contribution to the state employment policy.

Working hours

The amended law will include explicit definitions of even and uneven schedule of working hours and unify the maximum length of a shift to twelve hours. Although the Labour Code will no longer distinguish between even and uneven schedules of working hours, in practice the employers may still schedule the work in this way. The employers will continue scheduling the statutory weekly working hours evenly or unevenly, but they will no longer be limited by the different lengths of shifts and the different lengths of the compensatory period.

Furthermore, the provision concerning the length of weekly working hours will be more specific. It will be possible to agree on working hours that are shorter than the defined forty working hours a week only on an individual basis between the employer and the employee.

A major change is the abolishment of the employer’s duty to record the difference between the prescribed and the actual working hours in the account of working hours on a weekly basis. This change could make this relatively new concept more flexible and reduce the administrative load born by the employees.

Reasons for termination

The amended law introduces a new reason for termination under Section 52 (h) for the material breach of duties of a worker (an insured person) temporarily incapable of working. An employee in the position of an insured person that is temporarily incapable of working will be obligated to adhere to the patient regime under the health insurance law during the first twenty one calendar days. However, the employers will be limited by the fact that it will be possible to exercise this reason for termination only within one month from the day when they learned of the occurrence of such a reason, but no later than within one year from the day when such a reason arose.

Severance paymentUnder the current legislation, the amount of the severance payment is conditional on the reason for which the employment was terminated. While in the case of terminating the employment due to medical reasons the severance payment shall remain in the amount of twelve average monthly salaries, the amount of the severance payment will change in the case of termination due to organisational reasons. The amount of the severance payment under the amended law will depend on the length of the employment at the employer as follows:

At least one average salary, if the employment lasted less than one year;

At least two average monthly salaries, if the employment lasted between one and two years;

At least three average monthly salaries if the employment lasted more than two years.

Discretionary power of a judge

The amended law introduces the historical concept of the discretionary power of a judge in connection with claims arising from invalidly terminated employment contracts. If the total period for which the employee is entitled to a compensation for his wage or salary exceeds six months, the court may decrease the total amount of the compensation for the wage or salary. In its decision-making, the court shall particularly take into consideration whether the employee was employed at another employer in the meantime, what type of work he carried out for the other employer and what remuneration he gained there, as well as the reason why he did not get involved in the work at the other employer.

Invalidity of legal acts

Since the decision of the Constitutional Court adopted in April 2008, the Labour Code has been based on the principle of the relative invalidity of legal acts. The amended law maintains this principle, i.e. a legal act is considered to be valid if the person affected by such an act does not effectively appeal against its invalidity, however, the cases of nullity will be also enumerated. These cases will be enumerated in the amended Labour Code and will involve legal acts that contradict good morals or the law, or circumvent the law, or have not been made in a free, true, determinate or understandable manner, or have been made by an incompetent person.

As far as the form of a legal act is concerned, it will be possible under bilateral legal acts for the parties to remedy the formal defects of the legal act. If the parties do so, the concerned legal act will be considered valid ex tunc, i.e. from inception.

However, collective agreements and unilateral legal acts (e.g. notices, immediate terminations of employment) will always be regarded as invalid if their written form is deficient.

Leave

Matters related to leave will be regulated in reaction to the judgements of the European Court of Justice concerning untaken leave. Under the amended law, the right of untaken leave will not cease to exist. The employer will be obligated to determine the leave in such a manner that it is taken by the employee in the same calendar year in which the employee’s leave entitlement was created. Exemptions will apply to obstacles on the part of the employer and to urgent operational reasons. In these cases, the employer will have to determine the leave so as to be taken before the end of the next calendar year. If the leave is not determined before 30 June of the next year, the employee alone shall have the right to determine his leave. In cases of temporary incapacity to work, maternity leave or parental leave, the employer will be obligated to determine the taking of leave after the termination of obstacles to work. Compensatory salary for untaken leave may only be paid at the termination of employment.

Non-competition agreement

In addition to the above-mentioned novelty that provides for the possibility to agree on a non-competition clause for the probationary period, the terminology has also changed. The term agreement (in Czech “dohoda”) will be replaced with the term non-competition clause (in Czech“konkurenční doložka”). The most important change is the reduction of the minimum amount of the monetary compensation which is provided to the employee for his compliance with non-competitionto an amount equal to one half of the employee’s average earnings for each month when the obligation under the non-competition clause is performed.

Temporary assignment

Under the current legislation, employees may be temporarily assigned solely by job agencies that have been authorised by the Labour Office. The amended law will also allow for a temporary assignment between employers without the above authorization, subject to the consent of all involved parties. As opposed to agency employment, it will not be possible to temporarily assign an employee to another employer for consideration, and it will not be possible to conclude an agreement on the temporary assignment earlier than after the expiry of a 6-month period from the date when the employment was created.

Salary with respect to overtime work

Under the amended law, it will be possible for all employees to agree on overtime work of up to 150 hours per calendar year. For agreeing upon the salary of the managerial staff, it will be possible to take into account the maximum allowed hours of overtime work.